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December 11, 2018
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Am I entering Owner's Draw correctly?

  • December 11, 2018
  • 3 replies
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I'm a sole member LLC.

I've got an "Owner's Equity" equity account set up and any time I Take money from my pocket and spend it on the company, I log it in this account and categorize it properly for tracking purposes.  

When I want to take money from the company, I created an "Owner Draw" equity account.  Do I write myself a check and use the "Owner Draw" account?  I noticed that if I do that, the draw account goes into a negative balance.  I feel like I should not have created a draw account and instead, wrote a check against the "Owner's Equity" account.

Which is correct?


Thanks!

Best answer by SkinnyRaven

Yes use your draw account, look at the sample company files and see how these are setup.

3 replies

December 11, 2018

Yes use your draw account, look at the sample company files and see how these are setup.

December 11, 2018
so a negative balance is ok for the draw account?
December 11, 2018

Yes, the draw account will be negative, this is a record of funds taken from the business.

December 11, 2018
Will this negative draw called "Owners Draw" as an equity account carry balances from year to year?  I currently see the amount I drew last year and this year to date.
August 9, 2023

Owners draw is a contra equity account so it tracks the reductions to equity due to owners taking out and devaluing company equity.